Plaintiff Christopher Hermanns had been an adjunct college professor. He claimed that he quit his job at his father’s request to work in his father’s linen rental business (the “Company”). His father was the sole shareholder of the business, although plaintiff served as the president for six years. According to plaintiff, during his years of work at the business, his father repeatedly assured him that “he had sweat equity in the Company and a secure job.” Plaintiff sued in the Superior Court of New Jersey, Chancery Division, General Equity Part, to enforce that alleged promise.

The case was before the Honorable Robert P. Contillo, P.J.Ch. on plaintiff’s motion to file an amended complaint. According to plaintiff’s original complaint, in 2016 his father told him that he had been diagnosed with Alzheimer’s disease, and that plaintiff needed “to buy the Company from me right away.” Plaintiff’s proposed amended complaint stated that his father instead expressed a desire to transfer the company to plaintiff. Plaintiff alleged that he and his father met with his father’s attorney to discuss ways in which the transfer of ownership could be accomplished, but that ultimately his father’s Alzheimer’s disease frustrated and derailed the process. As a result, plaintiff was ousted from the business.

Plaintiff sought to amend Count One of his Complaint, to include allegations that plaintiff had made “many significant sacrifices for, and contributions to,” the business, including quitting his profession, and accepting lower compensation than he would otherwise be entitled to, in reliance on his father’s “repeated promises and assurances” that he “had a secure job, sweat equity in the family business, and would succeed… as the owner” of the business. Plaintiff claimed that his father’s Last Will and Testament evidenced these promises by designating plaintiff as the beneficiary of the business ownership.

Plaintiff also sought to add a Count Four to the complaint, claiming unjust enrichment. Plaintiff claimed that he incurred legal fees and expenses to protect the business’s proprietary and confidential information and records during the litigation.

The relief sought by plaintiff included a declaratory judgment that he continued to be president of the company, that he was not terminated, that his father was estopped from terminating him or transferring ownership of the business to anyone except plaintiff.

The defendants opposed plaintiff’s request to amend his complaint. Defendants claimed that leave to amend should be denied because the new claims were futile.

The court found that, although a motion to amend should be liberally granted, the court must exercise discretion using a two-prong analysis: (1) whether the amendment would prejudice the nonmoving party; and (2) whether granting the amendment would be “futile,” because “it is an error to permit an amendment that fails to state a cause of action on which relief can be granted.”

The court considered plaintiff’s proposed amendments to Count One, regarding the sacrifices and contributions plaintiff made to and for the business, and that he was repeatedly promised and assured that he had “sweat equity” in the business, would have lifetime employment, and would “succeed” to the company. The court found that the proposed amendments to Count One gave no particulars about how and on what terms the business succession or lifetime employment were to have occurred. As to the lifetime employment claim, it found that such a claim can be made, “where the employee has given consideration additional to the services incident to the employment,” but that, because of the unusual nature of a contract for lifetime employment, “the responsibilities assumed and the obligations imposed will be neither created nor spelled out by mere inference when they are not clearly and unequivocally expressed in the contract itself.” Although oral contracts for lifetime employment are enforceable, they are difficult in fact to prove. The court permitted the plaintiff to amend the complaint to state this cause of action, although it noted that the plaintiff had a “high hurdle to surmount” in proving the claim.

As to the plaintiff’s proposed amendment involving his father’s alleged promise that plaintiff would succeed to the business, the court found that this claim could proceed on three potential avenues: plaintiff could claim (1) that the parties had entered into an oral contract to make a Will to leave the business to the plaintiff; (2) that the father promised to gift his shares of the company to plaintiff; or (3) that plaintiff and his father had entered into an enforceable oral agreement for his father to sell his shares of the business to plaintiff. Addressing the first of these options, the court noted that “it has long been the law in the State of New Jersey that a child may bring an action against a parent, while the parent is still alive, to enforce an oral promise to leave assets to him or her upon the parent’s death.” After the parent’s death, such promises must be in writing, pursuant to N.J.S.A. 3B:1-4. As to the second option, plaintiff never alleged that his father promised to gift the business to him, but a promise to make a gift, if not supported by consideration, is not enforceable. As to option three, the proposed Amended Complaint did not allege that the parties had entered into a contract or oral agreement. In sum, the pleadings characterized his succession to the company as merely a “verbal promise or assurance of succession,” and “even if these vague statements were considered offers, there is no discussion of a contract, an agreement, mutual assent to material terms, or any sort of bargained-for exchange.” Moreover, even assuming that plaintiff claimed that his “sweat equity” or “sacrifices and contributions” to the business constituted consideration, he did not allege that his father ever assented to any terms of a contract. Because none of those claims were contained in the proposed Amended Complaint, the court concluded that “each of these three avenues are dead ends.” Having found the “promise to succeed” claim to be futile, the court denied that proposed amendment to Count One, “without prejudice.”

In Count Four of plaintiff’s proposed Amended Complaint, plaintiff alleged unjust enrichment, because he incurred legal fees and costs to preserve the confidentiality of business records during the litigation.  The court found that “unjust enrichment is an equitable remedy resorted to only when there was no express contract providing for remuneration.” A claiming party must allege that the defendant received a benefit; that allowing the defendant to retain that benefit would be unjust; that the plaintiff expected remuneration from the defendant when he conferred the benefit; and that the defendant’s failure to compensate the plaintiff enriched the defendant beyond contractual rights. Although the plaintiff had failed to specifically plead that he had expected remuneration for his efforts to secure the business’s confidential information, the court concluded that such expectation (as well as the other necessary elements of the claim) could be inferred from the pleadings. As such, the court allowed the proposed amendment to Count Four.

A copy of Hermanns v. Hermanns can be found here – Hermanns v. Hermanns

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